The Atlantic on the Economy

By Clive Crook

Congratulations to my Atlantic colleagues, notably Elizabeth Keffer and Steve Clemons and their team, for yesterday's Economy Summit. Even by their standards this was quite an undertaking. A fast and ambitious program kept a huge room packed all day, and everyone I spoke to about it was impressed. Paul Volcker, as usual, was a highlight. You can listen to his talk and then see him interviewed by Clemons in this video of the proceedings (starting at 06.15). Another segment I'd especially recommend is James Bennet's interview with Gene Sperling, which you can watch here (starting at 27.20).

As part of the program I talked to Allan Meltzer about Ben Bernanke's Fed, among other things. Meltzer, a historian of the Fed and an eminent monetary economist, is a critic. He thinks the Fed worries too much about the short term and not enough about its main job, medium- and long-term control of inflation. Unwinding the Fed's recent interventions without inflation will be very hard, he believes (video here, starting at 02.11.30). Much as I respect Meltzer, I don't share his assessment of Bernanke. I think the chairman has done a good and brave job under extremely difficult circumstances, and when he has taken the Fed beyond its traditional monetary-policy role and methods (for instance by straying into quasi-fiscal policy), it's because he had to and the alternative would have been worse.

The new issue of The Atlantic carries an excellent profile of Bernanke by Roger Lowenstein. The article mostly praises him, and I think rightly, but it's also correct when it says it's too soon to be sure how good or bad a Fed chairman he's been. Ask Alan Greenspan what time can do to these appraisals.

Ultimately, Bernanke's legacy will depend on whether he can fully exit from the mortgage debacle without bequeathing a new one, or lighting an inflationary fire that becomes uncontainable. Alan Greenspan retired as the prince of central banking, but saw his reputation wither because of the bubble that burst on Bernanke's watch. In office, Paul Volcker was highly controversial because of his hawkish policies; today he is practically canonized. Vincent Reinhart, who served under both Greenspan and Bernanke as the senior monetary deputy and is now retired, told me I was writing about Bernanke "five years too early." For sure, no one knows where either inflation or unemployment will be in five years' time. Forgoing a guess, I would offer the appraisal by Hank Paulson, the former treasury secretary, who told me recently: "I don't know what people expect Ben to do. To me, it's pretty amazing. Who would have guessed when he came to Washington we would be so fortunate to get someone who was willing to think outside the box and deal with this unprecedented crisis?"

History will be the judge, but Lowenstein's piece is a fine first draft.